Hyperinflation is that transition period when a paper money is clearly failing as a store of value but has not yet died as a medium of exchange. This blog is to look at this and any other interesting economic issues. Vincent Cate

If you look at the last 5 reported months China has gone from 1297.3 to 1304.5 but last month it was 1293.8. So last month you could say they were slightly down for 4 months and this is slightly up for 5 months. But China has since said it is No Longer in China’s Interest to Increase Reserves.

In both cases the government deficit was being financed with new money and that was the true cause of the hyperinflation. In both cases the government blamed shop keepers for rising prices. In both cases shops were basically robbed with government approval. In both cases shops had to shut down as they could not operate at the prices they were allowed to charge.

Sunday, December 15, 2013

This list of 590+ dead currencies is interesting. I think there are nearly 150 listed as "hyperinflation". I expect that many of the others listed as "war" would count as hyperinflation if we used a 26% yearly rate as the cutoff. When a war is going poorly the currency usually is going poorly as well. So while it is reasonable to list war as the reason the currency died, the currency probably hit the 26% inflation mark before it died.

Note that ounces of pure silver or ounces of pure gold will never completely fail to have value.

Wednesday, December 11, 2013

Bernanke made new money but kept most of it in the Fed by paying interest on excess bank reserves. If you imagine a big black box around both the Federal Government and the Federal Reserve, then to everyone outside this box there is no difference between interest on government debt and interest on excess reserves. So really excess reserves are like government debt as far as the impact on the economy, inflation, and risk of hyperinflation.